US auto sales rise to near 2-year high

New York, December 2, 2011

Strong sales gains by major automakers, paced by Chrysler Group and Volkswagen, put November US auto sales on track to hit a two-year high as consumers returned to showrooms even without a big year-end sale.

Chrysler and VW posted the highest percentage gains at 45 per cent and 41 per cent, respectively.

General Motors and Toyota Motor Co trailed with increases of 7 per cent. Honda Motor sales were down 6.4 per cent.

The industrywide sales rise in November came despite lower spending on discounts by the automakers compared with a year earlier. The average vehicle price rose 4 per cent to top $30,000, according to industry-tracking firm TrueCar.com.

Automakers were able to charge higher prices for new cars because prices for used cars are strong and low-interest-rate loans kept new vehicles affordable for many consumers, analysts said.

Initial results from major automakers suggested industrywide sales in November exceeded analyst expectations for an annualized sales rate of nearly 13.4 million vehicles.

A sales rate of 13.4 million or higher would be the strongest for the US market since August 2009, when the US government was running the "cash for clunkers" trade-in incentive program.

November is the third straight month that annualized vehicle sales have topped 13 million. US auto sales have been trending higher since June, despite the still weak employment and housing markets.

The average vehicle on US roads is almost 11 years old, two years older today than the average in 2007, when the US auto industry began to tip into a downturn.

Pent-up demand

For more than a year, analysts have been predicting that many older cars would begin to break down beyond the point of cheap repairs, spurring replacement sales even without a broader upturn in the economy.

As a share of overall US consumer spending, spending on vehicles is down to 3.5 per cent in 2011 from a long-term average of near 6 per cent, Ballew said. In the depth of the 1982 recession, it was 4.5 per cent.

"We are starting see more and more of this pent-up demand realized," said Ford economist Jenny Lin.

Analysts and some auto executives said American consumers appear to be willing to make big-ticket purchases when necessary, despite uncertainties like the economic outlook in Europe.

"The biggest change in the consumer attitude is that a lot of consumers are now realizing this uncertainty in the market is not going to disappear completely any time soon," TrueCar.com analyst Jesse Toprak said. "It's a big mind shift, which is positive for the industry."

Another positive development for US automakers was the rise in sales of trucks, including work vans and SUVs. Those larger vehicles remain more profitable than the smaller passenger cars where Detroit automakers are making a push to compete.

Sales of pickup trucks, watched as an indicator for a recovery in sentiment and spending by small businesses, including construction firms, were up in November.

Sales of Ford's F-Series, which includes the top-selling F-150 pickup truck, shot up 24 per cent, making it the best monthly performance for the brand since 2006.

At GM, sales to small businesses were up 16 per cent, led by the company's Chevrolet and GMC trucks. Sales of GM's most popular pickup trucks, the Chevy Silverado and GMC Sierra, were up 31 per cent.

"Small business owners need to replace their fleets, and some of these vehicles are near the end of their useful lives," said Alan Batey, head of GM's Chevy brand. – Reuters